Coming in 2008: An Urbanized World

♠ Posted by Emmanuel in at 11/14/2007 01:30:00 AM
Welcome, fellow earthlings, to the age of the city dweller. According to this article in the IMF publication Finance & Development, 2008 should mark the first time in history that more folks will live in urban than in rural areas. Yes, there are issues as to how various nations differentiate urban from rural, but the urbanization trend is clear especially in the world's biggest nations--China and India. Is this trend something to celebrate or something to be wary about? That's a big question. Let's try and separate the issues here so we can individually come up with more nuanced judgments. To start, how does urbanization occur?

Even so, there is much that we can say about the process of urbanization and its effects. To begin with, we know that urbanization occurs via three distinct routes. The most visible growth is generated by migration from rural to urban areas—witness China's recent urbanization, which has been driven largely by such migration. Second, urban populations may grow through "natural increase"—that is, the growth of the existing urban population—and the UN estimates that this accounts for 60 percent of urban growth. Third, urbanization can occur with the reclassification of rural areas as urban as a result of population growth.

Next, what are the benefits from urbanization according to recorded data?

Those who view urbanization in developing countries as beneficial point to several factors. First, they note that many benefits of urbanization accrue to individuals. Among the most important is the income differential, in which urban incomes tend to be higher than those in rural areas. In China, for example, average household income in cities is almost three times greater than in rural households.

Other factors that improve quality of life may also be more prevalent in cities than in the country. For example, government programs can be applied more efficiently in urban areas by realizing economies of scale in delivering transportation, communication, water supply, sanitation, and waste management services.

Education systems may be more effective in cities insofar as educated people who can teach in schools and universities are in greater supply. In developing countries, educational enrollment is generally higher in cities than in rural areas, with even urban slums outperforming rural regions. Similarly, female literacy rates are on average 35 percent higher among urban populations than among rural populations. Larger pools of urban health care workers and greater specialization in medical activities—which can lead to higher returns on health care investment—all result in urban residents enjoying generally better health than their rural cousins.

In most urban areas, both desired and actual fertility are relatively low because caring for children when parents work outside the home is more costly, urban housing is more expensive, children have less value in urban household production, and family planning and reproductive health services are more accessible in cities. Individual families with fewer children are in a better position to concentrate their resources on providing each child with a better upbringing, strengthening the child's economic prospects later in life.

Second, the optimists say that urbanization has positive outcomes at the national level. Urbanization is a natural part of the transition from low-productivity agriculture to higher-productivity industry and services. Cities attract businesses and jobs, and the concentration of industries and services in turn encourages productivity growth. And there are other routes to enhanced productivity. For example, with increased opportunities for division of labor (because of higher population density and the variety of jobs provided by industry), intraindustry specialization in specific activities becomes more likely. Urban firms can learn from others working in the same industry and from their suppliers, and are also closer to their markets and thus better able to respond to changing demand. Relatively cheaper transport combines with this proximity to customers and suppliers to reduce trade costs. And, by aggregating many educated and creative people in one place, cities incubate the new ideas and technologies that accelerate economic progress. In addition, the fact that urban living encourages reduced fertility could support enjoyment of a society-wide "demographic dividend"—as the generation born before fertility declines can do more paid work and save more, thanks to fewer child dependents to support during its prime productive years.

Third, the optimists contend that urbanization contributes to rural development. People who migrate to cities often send remittances to their families based in rural areas. Their migration reduces the size of the labor pool available to work in rural areas, so wages there may increase. There is some evidence that urbanization is associated more strongly with poverty reduction in rural than in urban areas, but this is partly because poor rural migrants moving to urban areas increase the proportion of poor people living in cities.

It is uncertain, however, whether all of these apparent benefits actually serve to elevate real GDP per capita. We do find a positive cross-country association between income and urbanization...which juxtaposes country-level data on real GDP per capita and the share of the population living in urban areas during 1960 and 2004. But the upward rotation of the association over time indicates that higher incomes were associated with each level of urbanization in 2004 than in 1960. Also, the fact that the curves are initially very flat is consistent with the view that the links between urbanization and income are relatively weak at low levels of development.

Last, what are the downsides associated with urbanization?

Those who view urbanization in developing countries as harmful often point to several factors, including its impact on the environment and quality of life. Because of the effects of traffic congestion, concentration of industry, and inadequate waste disposal systems, environmental contamination is generally higher in cities than in the countryside and often well in excess of the local environment's inherent capacity to assimilate waste—which undercuts human health. Cities also make demands on land, water, and natural resources that are disproportionately high in relation to their land area and, because of high income and consumption, their population size as well.

Even though urbanization may increase incomes, it is also linked to increases in urban poverty, with the rate of growth of the world's urban poor exceeding the rate of growth of the world's urban population. And inequality within developing world cities is stark. Because quality urban housing is so costly, the urban poor often resort to living in slums, where water and sanitation facilities are inadequate and living conditions are crowded and often unhealthy. The UN estimates that the number of people living in slums passed 1 billion in 2007 and could reach 1.39 billion in 2020, although there are large variations among regions (see Chart 5). Asia has by far the highest number of city dwellers living in slums—the problem is worst in South Asia, where half of the urban population is composed of slum dwellers. But in percentage terms, sub-Saharan Africa leads the pack: about 72 percent of city dwellers in that region live in slums.

In many of these slum communities, [untreated sewage] is severely detrimental to health and aesthetics. Malnutrition in slum areas is much higher than in nonslum urban areas. In Ethiopia, for example, UN-HABITAT reports that slums have child malnutrition rates of 47 percent, while other urban areas have rates of 27 percent. Child mortality is higher and primary education enrollment lower in slums than in nonslum urban districts, and slum dwellers are more vulnerable to environmental disasters and pollution.

These inequalities often lead to other, sometimes greater, social problems, such as crime and violent conflict. The growth in urban populations in developing countries is in large part a growth in the number of young people. The UN Population Fund predicts that, by 2030, 60 percent of those living in urban areas will be under the age of 18. The proportion of young people is particularly high in slum areas, where employment opportunities are limited. This combination of youth and poverty can make for high crime rates. Some demographers have forecast that the increasing concentration of humanity in big cities will lead to major conflicts affecting both urban areas and entire countries.